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For  additional  information  regarding  our  convertible  notes,  derivative  liabilities,  and  SAFEs,  including 
descriptions of the individual instruments, their key terms, conversion activity, and balances during the periods 
presented, see Note 9 to our consolidated financial statements included elsewhere in this prospectus.

Leases

We lease facilities and equipment, including compute and infrastructure capacity, under operating and finance 
leases. We determine whether an arrangement is or contains a lease at inception and evaluate the classification 
of  our  leases  at  lease  commencement  and,  as  necessary,  upon  modification.  Accounting  for  leases  requires 
significant  judgment,  including  determining  whether  an  arrangement  is  or  contains  a  lease,  and  significant 
estimates,  including  the  expected  lease  term,  the  fair  value  of  the  leased  property,  and  our  incremental 
borrowing rate.

Given the size and duration of our lease portfolio, changes in our estimate of the fair value of the underlying 
leased asset, the expected lease term, or the determination of our incremental borrowing rate could result in a 
different  lease  classification  or  a  materially  different  measurement  of  our  right-of-use  assets  and  lease 
liabilities.

Income Taxes

We account for income taxes using the asset and liability method, recognizing deferred tax assets and liabilities 
for temporary differences between the financial reporting and tax bases of assets and liabilities, as well as for 
net operating loss and credit carryforwards, measured at enacted tax rates applicable in the years of expected 
reversals.  We  establish  valuation  allowances  when  necessary  to  reduce  deferred  tax  assets  to  amounts  more-
likely-than-not expected to be realized, based on the weighting of positive and negative evidence. 

Assessing  the  realizability  of  our  deferred  tax  assets  is  an  area  of  significant  management  judgment.  We 
evaluate our deferred tax assets for recoverability based on historical taxable income, projected future taxable 
income,  reversal  patterns  of  existing  temporary  differences,  and  available  tax  planning  strategies.  As  an  AI 
company  operating  in  a  rapidly  evolving  market  with  significant  ongoing  investment  in  compute  and 
infrastructure, our projections of future taxable income are inherently uncertain. Should our assessment of the 
recoverability of deferred tax assets change, our income tax provision would be adjusted in that period, which 
could materially impact our results of operations.

We  account  for  uncertain  tax  positions  in  accordance  with ASC  Topic  740,  Income  Taxes.  Tax  benefits  from 
uncertain  positions  are  recognized  when  it  is  more  likely  than  not  that  the  position  will  be  sustained  on 
examination based on its technical merits, measured at the amount that is more likely than not to be realized 
upon  settlement.  These  assessments  require  judgment,  particularly  with  respect  to  the  qualification  and 
documentation of research and development tax credits, where supporting evidence may be subject to differing 
interpretations.  The  actual  outcome  of  these  matters  may  differ  materially  from  our  current  estimates.  We 
recognize interest and penalties related to unrecognized tax benefits within our provision for income taxes.

Loss Contingencies

We are involved in legal claims, proceedings, and other regulatory and administrative matters that arise in the 
ordinary course of business, certain of which may include speculative claims for substantial or indeterminate 
amounts of damages. 

We routinely assess each significant matter and its potential financial exposure. We record a liability when we 
believe it is both probable that a loss has been incurred and the amount can be reasonably estimated, and we 
disclose  matters  for  which  a  loss  is  reasonably  possible  and  the  loss  or  range  of  loss  can  be  estimated.  These 
assessments require significant judgment in determining both the likelihood and estimated amount of potential 
losses. We base our accruals on the best information available at the time, taking into account the specific facts 
and  circumstances  of  each  matter,  the  merits  of  our  defenses,  and  the  impact  of  negotiations,  settlements, 
regulatory proceedings, rulings, and advice of legal counsel. Our estimates are subject to change as additional 
information becomes available and as matters develop, and we have in prior periods revised our assessments 
based on updated information.

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